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November 1, 2015

Structured settlements in the Garden State

Filed under: Structured settlements — Peter Arnold

Nelson_JohnsonDavid Gialanella at The New Jersey Law Journal has been writing about structured settlements recently, specifically the recent decision by Atlantic County Superior Court Judge Nelson Johnson (at left) in In re T. Keena, Transfer of Structured Settlement Proceeds to Peachtree Settlement Funding, which was approved for publication September 29.

Gianella’s latest, “NJ Opinion Makes Waves in Structured Settlement Industry,” which quotes me multiple times, is an insightful explanation of the complexities surrounding structured settlement transfers.  These transfers, which have been regulated for the past 14 years through Section 5891 of the federal tax code, have become an integral part of the structured settlement industry.

Multiple structured settlement consultants have told me that Section 5891’s rules on transfers are a standard part of their marketing tactics.  In particular, they discuss these rules with plaintiffs who express hesitancy about structuring part of a settlement.

The real issue, which all parties to this legislation understood when it was passed, is that the primary market has a crucial financial interest in ensuring that transfers remain viable for those in need. But everyone also accepted that federal legislation could not possibly micromanage financial decisions by accident victims.

So the agreed-upon solution was to kick the issue to judges and give them vague guidance about what constituted grounds for approval.

Incidentally, it‘s also worth noting that the line between the primary and secondary structured settlement industries has become more porous since approval of the 2001 federal law. Economic realities are driving greater cooperation among companies in the respective marketplaces.

Well done, David Gianella.  Here’s hoping that you keep following this issue.